J.M. Smucker sells its U.S. baking business in deal valued at $375 million

Monday

Jul 9, 2018 at 5:11 PM

The J.M. Smucker Co. is getting out of the U.S. baking business.

The Orrville food company announced the signing of a definitive agreement to sell its U.S. baking business — which includes such iconic brands as Pillsbury and Hungry Jack — to Brynwood Partners IVV LP and Brynwood Partners VIII LP in a transaction valued at $375 million. The companies are subsidiaries of Brynwood Partners.

The transaction primarily encompasses products sold in U.S. retail channels under the Pillsbury, Martha White, Hungry Jack, White Lily and Jim Dandy brands, along with all relevant trademarks and licensing agreements, and the company’s manufacturing facility in Toledo.

The U.S. baking business generated net sales of about $370 million for the company’s fiscal year ended April 30, which were primarily reported in its U.S. Retail Consumer Foods segment. The transaction does not include Smucker’s baking business in Canada.

“The divestiture reflects our strategy to further focus our portfolio and develop a stronger presence in pet food, coffee, and snacking — all large, growing categories with sustainable growth projections,” Mark Smucker, president and chief executive officer, said in a news release. “Pillsbury, Martha White, and Hungry Jack remain iconic brands and, although they no longer align with our strategic priorities, we are confident they will be nurtured at Brynwood. While the decision to divest these brands was difficult, it underscores our commitment to allocating resources toward those areas of the business critical to our growth.”

Smucker has owned the Pillsbury and Hungry Jack brand since 2004, when it acquired those and other brands in a $840 million deal that at the time nearly doubled Smucker’s revenues and expanded its reach for grocery shoppers.

The divestiture of the U.S. baking business is not a surprise. The company announced plans in April to explore the divestiture.

Greenwich, Conn.-based Brynwood Partners describes itself on its website as a lower middle market buyout fund that acquires consumer product companies. Established in 1984, “the managing partners of Brynwood Partners have extensive operating experience, as CEOs and CFOs of both public and private companies, which allows the firm to acquire both performing and underperforming businesses and corporate orphan brands with or without management teams. Brynwood Partners will only target investment opportunities where it can leverage the operational expertise of its managing partners to create significant shareholder value.”

The partners have more than $1.4 billion of assets under management.

Smucker said it expects the divestiture “to be dilutive to its adjusted earnings per share by 25 to 30 cents on a full-year basis, reflecting foregone profit related to the U.S. baking business, before factoring in any potential benefit from the use of proceeds from the sale. However, the company expects the net impact of the divestiture to be only slightly dilutive to its fiscal 2019 adjusted earnings per share, as foregone profit for the remainder of the fiscal year is expected to be mostly offset by an anticipated one-time gain on divestiture. This expectation also excludes any potential benefit from the use of proceeds from the sale. The company will further discuss the transaction’s anticipated impact on its fiscal 2019 outlook when it releases its fiscal 2019 first quarter results in August,” the company said in a statement.

The transaction is expected to close in the second quarter of the company’s 2019 fiscal year, subject to customary closing conditions, including receipt of required regulatory approvals.

Staff writer Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter.

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